Difference between revisions of "Papers on Economic Agent-Based simulation"

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==Constructive Modeling of Decentralized Market Economies: An Agent-Based Computational Economics Approach==
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The content of this page has moved [http://minsim.cs.princeton.edu/publications.htm here].
Presentation given by Leigh Tesfatsion
 
 
 
A presentation on the general working of agent-based economic simulation.
 
 
 
*Difficulty of modeling real world dynamic economic systems
 
**Distributed local interactions
 
**Strategic behavior and uncertainty
 
**Institutional constraints
 
*Previously, assumed everyone rational, so no need to look deeper into cognition and social interactions
 
*Agent-Based Computational Economics (ACE)
 
**Economic world with various agent types
 
***Agents adapt behavior, communicate, learn to complete goals
 
**Set initial conditions
 
**World develops over time
 
**Events driven by agent interaction
 
*ACE research
 
**Empirical Understanding
 
***Explanation for persistently observed empirical regularities
 
***Are these trends always observed in the models?
 
**Market Design
 
***Efficient, fair, and orderly social outcomes?
 
***Even if agents try to ‘game’ the system?
 
**Qualitative Analysis
 
***What are the performance capabilities?
 
***Does coordination occur?
 
*Starting point
 
**Two-sector Walrasian equilibrium economy
 
***No imposing equilibrium conditions
 
***Agent driven production, pricing, and trading
 
***Does equilibrium emerge?
 
**Look for market organization
 
***How does trading occur?
 
***Bilateral or mediated trade?
 
****Mediators: brokers (no inventory) and dealers (inventory)
 
**Mediated markets: auction (central, clearing houses), OTC (not central, managed by dealers), exchanges (mix)
 
**Look for learning behavior
 
***Price/quantity discovery process
 
***Buyer-seller interaction networks?
 
****Long term relationships: trust?
 
****Trading
 
*****Terms of trade
 
*****Seller-buyer matching
 
*****Trade
 
*****Settlement
 
*****Manage longer term relationships
 
*Illustration by Hash-and-Beans economy
 
**Learning method can matter
 
*Issues
 
**Setting initial conditions?
 
***Carrying capacity
 
***Market clearing
 
***Market efficiency
 
*Disadvantages
 
**Intensive experiments often needed
 
**Multi-peak rather than central-tendency outcome distributions can arise
 
**Difficult to learn and build platform
 
*Advantages
 
**Permits systematic study of behavior and markets
 
**Can look at interesting problems and get quick feedback
 
 
 
The presentation can be found [http://www.econ.iastate.edu/tesfatsi/ACEIntro.Econ502.pdf here].
 
 
 
==Introduction to Walrasian General Equilibrium Modeling==
 
Paper by Tesfatsion (8/06/08)
 
 
 
*Decentralize market economies are complex dynamic systems made up of micro agents taking part in local interactions.
 
**This creates global regularities
 
***e.g. employment and growth rates, income distributions, market institutions, and social conventions
 
***Creates interdependent feedback loops
 
*Walrasian equilibrium model common way macroeconomists model the economy
 
**Consists of finite profit-maximizing firms, finite consumers with exogenously determined preferences, and a Walrasian Auctioneer
 
**9 Basic Assumptions for Walrasian Equilibrium Model
 
***1)Fixed finite number of consumption and capital goods.  All goods are private, excludable, and rival
 
***2)Fixed number of consumer agents with preferences over different bundles of goods and nonnegative initial endowments  of capital goods and labor
 
***3)Preferences of consumer can be represented by a utility function
 
***4)Fixed number of firms
 
***5)Income of consumers comes from dividends and sale of services
 
***6)Markets are complete
 
***7)Consumers take prices as given
 
***8)Firms take prices as given
 
***9)All purchase and sale agreements are costlessly arranged and enforced
 
*Simple WGE Illustration
 
**The market is said to be a Walrasian equilibrium if it satisfies the following four conditions
 
***At a specific vector e* comprising consumer supplies and demands for services and consumption goods, firm demands and supplies for services and consumption goods, non negative prices, expected prices, and expected dividends
 
****Each consumer is maximizing his utility and each firm is maximizing its profits
 
****Expected prices coincide with actual prices and expected dividends coincide with actual dividends
 
****Excess supply is greater than or equal to zero
 
****The total value of excess supply is zero
 
*Pareto Efficiency and the First Welfare Theorem
 
**How do we measure a person's welfare?
 
***Productive efficiency vs. Pareto-effiency
 
***Any Walrasian economy is Pareto efficient
 
*Robustness of the WGE
 
**The Walrasian general equilibrium model eliminates the need for economic agents to interact strategically
 
**Three Questions
 
***1)How might strategic interaction become important if firms set prices for their inputs and outputs?
 
***2)How might expectations and learning rules become important if firms set prices for their inputs and outputs?
 
****Information exploitation and exploration
 
***3)How might bankruptcy rules, rationing rules, and inventory management become important if firms set prices for their inputs and outputs?
 
 
 
The paper can be found [http://www.econ.iastate.edu/tesfatsi/WalrasIntro.pdf here].
 
 
 
 
 
==Non-Walrasian Equilibrium: Illustrative Examples==
 
Paper by Tesfatsion (7/31/08)
 
 
 
*Do all markets always clear, or can there be equilibrium without total market clearing?
 
*Keynesian equilibrium
 
**Those with incentive to change state have no power to, those who have power to change stare have no incentive
 
**Multiple possible equilibrium states
 
*Signaling problems
 
**Incomplete signaling
 
***Do not signal what future actions might be, so others have to make investment decisions that might be wrong
 
**Signaling not credible
 
***Even if signal today, not credible unless backed today by purchasing power
 
*Dynamic Stochastic General Equilibrium (DSGE) Model
 
**Allows disequilibrium, due to shocks
 
**Equilibrium would exist without shocks
 
**Tends toward equilibrium in the long run
 
*Involuntary Unemployment
 
**Wage/labor not in equilibrium
 
**Those with incentive to change state have no power to, those who have power to change stare have no incentive
 
***Unemployment equilibrium
 
**Optimism/pessimism about future signals can affect this equilibrium
 
*Demand Signaling
 
**How do customers signal future demand?
 
**Need current purchasing power to
 
**Liquidity constraints
 
**Clower: liquidity and credit constraints can lead to persistent involuntary unemployment due to signaling problems
 
***People can’t work as much as they want
 
***Can’t borrow vs. future income
 
*Effective Equilibrium
 
**Holds given
 
***Consumer and firm on effective demand and supply curves
 
***All price and dividend expectations are fulfilled
 
***Effective supply is at least at great as effective demand
 
**Firm as price taker in wage
 
***Would not lower unless perceived high employment supply
 
*Coordination Failure
 
**Mutual gains not realized because no individual has incentive to change from current behavior
 
**Can be Nash Equilibrium, but not Pareto efficient
 
 
 
The paper can be found [http://www.econ.iastate.edu/tesfatsi/nonwalra.pdf here].
 
 
 
 
 
  
 
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